California's two-tier economy

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About a quarter-century ago, I wrote a book about California's social, economic, demographic and political evolution and quoted a couple of academics who predicted “the possible emerging of a two-tier economy.”

Today, we can eliminate the “possible” qualifier because it's a proven fact.

A Census Bureau poverty report and another from the Center on Budget and Policy Priorities, released simultaneously last week, should remove any lingering doubt about California's stratification.

The Census Bureau is experimenting with a new way of gauging poverty, one that uses more measures of income and outgo and the cost of living. And by that new standard, California has – by a wide margin – the highest level of poverty of any state, with nearly a quarter of its 38 million residents in that category.

Meanwhile, the CBPP calculated, state by state, gaps in various family income brackets and found that California has the third-largest “income inequality” between those in the highest and lowest levels, and the second-largest between those in the highest and middle quintiles.

So, to put it in the vernacular, California's rich are richer and its poor are poorer, in relative terms, than almost anywhere else in the nation. That stratification also has, as those two academics predicted a quarter-century ago, an ethnic element. They saw a mostly white and Asian overclass, a mostly black and Latino underclass and a smaller middle class.

What happened?

The decline of a once-vigorous industrial economy wiped out countless well-paying, middle-class jobs. The emergence of a post-industrial economy rooted in trade, services and technology marginalized those without the specific talents and training the new economy demanded.

Public policy did not adjust to that new economic reality, nor to the rapid ethnic diversification of the state's population.

In particular, public education failed to adjust – in part because school finance and governance shifted from local hands to state politicians and bureaucrats and became politically polarized. The very wide disparities in educational outcomes, from test scores to dropout rates, between white and Asian students on one end and black and Latino kids on the other attest to that failure.

This socio-economic evolution paralleled, in time, another evolution, from a fairly conservative red state to a somewhat liberal blue state. Whether it's cause and effect is debatable, but it is, at least, noteworthy.

The state's dominant Democrats profess to oppose socio-economic stratification and champion egalitarianism and mobility and say they want to spend more in that direction, but with recently approved tax increases, the state already has one of the nation's highest state and local tax burdens.

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